In our last Newsletter, we pointed out some of the benefits of alternative dispute resolution in the construction arena.  Arbitration is often the dispute resolution mechanism of choice in the construction industry, as it is a cost-effective alternative to litigation, usually faster than litigation, and the parties can select an arbitrator with expertise in the construction field, which is not an option in court.
 
If you are contracting directly with homeowners, you should be aware that the Arbitration Clause which has served you on past projects may now be obsolete.   Even the standard AIA arbitration provision may not get you where you want to be if a dispute arises and the homeowner makes "statutory" claims against you based upon the Consumer Fraud Act or New Jersey's Home Improvement Act.  New York has similar provisions in its statues and in the City's regulations on home improvement contractors. Recently, New Jersey courts have refused to enforce arbitration clauses which fail to provide explicit notice to the homeowner that so-called "statutory" claims will be arbitrated. 
 
For example, you contract for $20,000.00 worth of roof repairs, and you complete your work.  The homeowner does not pay you your final payment of $3,500.00.  Your contract includes a clause which says all disputes arising from the contract will be arbitrated, and you file a claim in arbitration to collect your money.  You are served with a copy of a complaint which the homeowner has filed with the court, alleging that you breached your contract and violated the Consumer Fraud Act.  The homeowner is seeking a refund of amounts paid to you, treble damages, attorney's fees, and other costs, and files a motion to force you to stop the arbitration.  Chances are good that you will end up in court.  You should know that the Home Improvement Practices Regulations which are part of the Consumer Fraud Act make it a per se violation of the Act to do such seemingly innocuous things as enter into a home renovation contract that does not include a completion date or agree to a change in the work that is not contained in a signed written document.  But even if you have valid legal defenses to the Consumer Fraud Act claims of the homeowner, you will be forced to present those defenses in litigation rather than arbitration unless the wording of your arbitration clause satisfies recent court decisions.
  
While there is no "sure thing" our courts have provided some fairly specific guidelines for contract language which, based upon the current state of the law, can go a long way to provide that future disputes arising from residential renovation contracts are decided in an arbitration forum, rather than in court.